Treasurer Joe Hockey has revealed the deficit will beat his own December forecast as well as “market expectations” to come in below $40bn.
“Market expectations are for a budget deficit of around $40bn to $41bn, we’re going to beat that and we’re going to beat it every year,” Hockey said on Tuesday.
In the 2014 budget, the deficit was forecast to be $29.8bn. It was revised to $40.4bn in the December mid-year economic and fiscal outlook (Myefo), which also predicted total deficits over four years rising to $103.9bn. At the same time, peak debt was expected to increase from the May 2014 forecast of $51.6bn to $315.8bn.
“The last 12 months we’ve seen significant challenges facing the Australian economy,” Hockey said.
“The last 18 months we’ve had to write off $90bn of expected revenue but yet we are still on a credible trajectory back to surplus. In fact the trajectory is no different to that that I announced at the end of last year.”
Asked to nominate his favourite part of the budget, Hockey said: “It will be judged by people on the basis of whether it is responsible, measured and fair and whether it is going to help to drive economic growth, help to stimulate the Australian economy but at the same time have a credible path back to surplus.”
The government has been keen to turn around its stocks after its first budget, which was judged to be unfair by many sectors of the economy. Many big-ticket items, such as the Medicare co-payment, cuts to the indexation of the pension and higher education deregulation remain blocked in the Senate or dumped.
Bill Shorten said the budget would not be about fairness, because “fairness is something you believe in”.
“I have a message for Tony Abbott and for Joe Hockey – you can’t just buy fairness. Fairness is something you believe in,” said Shorten.
“If these people could manage to get through these changes [from the 2014 budget] again, they do not resile from what they have said. They do not ever say they were wrong and they have changed their minds, they have just taken a temporary retreat while they regroup and regather.”
As the government prepares to hand down its budget on Tuesday, public servants in the Australian Tax Office will begin rolling strikes to protest against the loss of pay and conditions as well as job losses of 4,400 tax workers.
The strikes come as the government seeks to chase down tax avoidance by multinationals and impose a GST for downloads – the so-called “Netflix tax” announced on Monday by Joe Hockey.
Much of the budget has already been selectively announced through news organisations ahead of Hockey’s budget speech at 7.30pm on Tuesday night. Small business and childcare are the centrepieces of the budget.
The childcare package, which increases handouts but stops mothers claiming commonwealth and employer benefits, was released at the weekend.
The latest reports, unveiled in New Ltd newspapers, predicts the 1.5% tax cut, already announced for around 700,000 small businesses with a turnover of less than $2m, will be extended to sole traders, tradies and other unincorporated businesses.
Unincorporated businesses do not pay company tax, so it is expected that they will receive concessions and deductions rather than tax cuts. Last week the government announced that new companies would be able to immediately write off tax deductions for startup costs, and can save time with a simplified registration system.
The assistant treasurer, Josh Frydenberg, would not be drawn on the details of the package, saying “all will be revealed” when Hockey hands down his budget.
“We want to simplify the red tape that they are subjected to,” he said of small businesses. “We really want to give them a lift. They are the engine room of the economy.”
Frydenberg said the measures would be offset by other savings in the budget, including the already announced cap on fringe benefit tax for charity and hospital workers.
The shadow treasurer, Chris Bowen, said the Coalition was slow in realising the importance of small business.
“We’ve led the way, and the government is playing catchup,” he told Sky News on Tuesday morning.
This article was written by Gabrielle Chan and Shalailah Medhora, for theguardian.com on Tuesday 12th May 2015 01.56 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010